SIE Chapter 2: Dividends, Warrants, and ADRs

Cash

A form of dividend; Typical way that corporations pay dividends; done via checks, brokerage firm pays in cash to investors directory using checks

Stock

A form of dividend; Investors who receive dividends in the form of stocks get extra shares according to how much they already had, used by companies to save cash

Property/Product

A form of dividend; Not as common, companies may choose to send parts of their property or products to shareholders

Declaration Date

The day the company chooses to pay all of its common stockholders; step 1 in the distribution process

Ex-Dividend Date

The day which shareholders no longer hold rights to receiving payment of diviends that have been declared to be paid

Record Date

The day investors much ensure it's on record that their names are on the stock certificate otherwise they will hold no rights to receiving dividends

Payment Date

The end of the distribution process when corporation pays dividends to its shareholders

Warrants

Type of security that enables an investor to buy common stock, comes at a subscription price that is more than the current market price of the common stock at the time the warrant is issued, can be exercised/traded

Units

A way to acquire warrants; If buyer buys the common stock of a coroporation during the IPO, the coroporation will usually issue warrants to them. Units are common shares that come with a warrant to buy another common share

Attatched to Bonds

A way to acquire warrants; companies sometimes offer warrants as an incentive to bond offerings in order to appeal to the market, enables company to sell bonds at a reduced coupon rate

Secondary Market

A way to acquire warrants; Investors can choose to buy a firm's warrants instead of common shares

American Depositary Receipts (ADRs)

A U.S.-traded certificate representing shares of a foreign company.

American Depositary Shares (ADSs)

The actual underlying foreign shares held by a depositary bank that the ADR represents.

Real Estate Investment Trusts (REITs)

Unusual kind of equity security and is majorly for purchasing, advancing or managing a real esate portfolio; won't pay taxes if real estate is the source of 75% of income and nothing less than 90% of its taxable income is allocated to shareholders

Nontraded REITs

Functionally same as REIT, non listed, have higher yield, still must have to allocate 90% of income to shareholders and report to SEC

A DPP (Direct Participation Program)

A pass-through investment vehicle that allows investors to directly share in the income, losses, tax benefits, and cash flow of an underlying business; comprised of limited partners and general partners

Limited Partners

Part of DPP; less liability minimal control; raise principal for investment, obtain extras from investment, choose to supervise business, have voting rights over business objectives/general partners, can file suit against general partners

General Partners

Part of DPP; more liability mroe control; can tradein property for the business, obtain settlement for supervising the business, sign lebally binding agreements for the business; cannot merge funds with that of the partnership, contest against the business, be lent money from teh business

Tax

for DPP or LP, no consequences for tax; tax deductions in partnerships are utilized in the reduction of investor's taxable earnings